Public benefit

A public benefit organization must be formed for public or charitable purposes and may not be organized for the private gain of any person. A public benefit organization cannot distribute profits, gains, or dividends to any person.

Mutual benefit

An organization that is most often organized for the benefit of its own members. It may not be formed exclusively for charitable purposes. If a mutual benefit corporation holds some of its assets for charitable purposes, it registers and reports on the charitable assets to the Attorney General of the State of California.

Religious

Organizations whose purpose is the study or advancement of religion.

Foreign corporations

Organizations that incorporate outside of California, in another state or country.

Nonprofit unincorporated associations

All unincorporated associations, even if organized on a nonprofit basis, are subject to California income tax, until Franchise Tax Board grants tax-exempt status.

An unincorporated association that has tax-exempt status must reapply for exemption if it incorporates.

Unincorporated Homeowners’ Associations are not subject to franchise minimum tax and may derive no benefit by being tax-exempt.

Qualifying trusts

Trusts must include a copy of their federal determination letter before we grant California tax-exempt status.

Other trusts not under Section 23701 that may qualify for tax-exempt status include Pension Trusts, IRAs, IRC Section 4947(a)(1), and Coverdell Trusts.

Processing time frames

FTB 3500, Exemption Application – approximately 90 days from received date.

FTB 3500A, Submission of Exemption Request – approximately 90
days from received date.

Retroactive tax-exempt status

FTB 3500, Exemption Application

Retroactive tax-exempt status is determined by the entity’s organizational structure and operations within the provisions of its exempt code section. An inactive organization is not entitled to tax-exempt status.

FTB 3500A, Submission of Exemption Request

For state income tax purposes, the effective date of an organization's
tax-exempt status shall be no later than the federal effective
date. If the federal effective date is later than the incorporation date,
the organization should consider filing FTB 3500, Exemption Application.

Example:

ABC organization incorporated on 10/01/1999.

Federal exempt status effective date is 01/01/2002.

ABC organization filed FTB 3500A.

California’s effective date for ABC organization is 01/01/2002.
To avoid the minimum franchise tax or income tax, ABC organization
must file FTB 3500, Exemption Application, to request an exemption
retroactive to 10/01/1999.

Refunds

You may receive a refund if your organization receives tax-exempt status and you have paid franchise or income tax before tax-exempt status was granted or acknowledged. The refund depends on the retroactive date of exemption and any unrelated business income tax due.

We will issue any refunds due once we grant or acknowledge tax-exempt status.

Any refunds due would be issued for the tax years that franchise or income tax was paid within the statute of limitations.

Where to file

FTB 3500, Exemption Application

Franchise Tax Board
PO Box 942857
Sacramento CA 94257-4041

FTB 3500A, Submission of Exemption Request

Disclosure of Application Materials

We may not disclose to the public the business and financial matters of a tax-exempt organization while we consider the exemption application; however, once we grant or acknowledge tax-exempt status, we may disclose information included with FTB 3500 or FTB 3500A. If we deny exemption, then that information remains confidential. If an organization’s tax-exempt status is revoked, then that information is available to the public.

Upon the organization’s request, public disclosure of documents relating to any trade secrets, patents, process, style of work, or apparatus may be withheld if we determine that disclosure would adversely affect the organization. Additionally, public disclosure of documents may also be withheld if the disclosure would adversely affect national defense.